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Life insurance or Funeral Plan

Financially planning for the future is always a good idea. When it comes down to it, the insurance market is swamped by a plethora of products that you may feel you ‘have to have’. However, no matter what the salesperson says, it comes down to choosing the product which is right for you.

In this article, we are going to discuss the pros and cons of life insurance and funeral plans. We are going to ask if funeral plans are a good idea and whether you might be better off taking out a life insurance plan to cover the cost of a funeral. Those are the points that most buyers of this type of insurance or plan are confused about when you ask them.


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Life insurance or funeral plan?

The funeral plan and life insurance market in the UK can indeed appear very complex. Here is what you need to know about funeral plans vs life insurance in a nutshell.

Life insurance

  • The payout can be used for any purpose which the beneficiary sees fit.
  • The amount insured can be variable just in case you are concerned about extra expenses
  • Your relatives will have to arrange the funeral and make all of the other arrangements
  • You may have to answer questions about your health and lifestyle or go through a medical
  • Can take time to payout

Funeral plans

  • The money only goes towards your funeral costs
  • The money received is governed by a Funeral Director who often works for the company providing the plan
  • You agree on all arrangements yourself together with the representative of the funeral plan representative or Funeral Director
  • No medical required and no need to answer questions
  • Everything agreed will be taken off and your family may need to do anything unless they feel they want to do something extra

What is life insurance and how does it work?

Life insurance is more flexible as your family, or a friend you nominate can distribute the funds in they would like. What you need to bear in mind, that no matter what happens, the question of your remains needs to be handled.

How does a funeral plan work?

Funeral plans vary in their nature and how they work. What is important is to make sure you take out the one which is right for you. It is all about having the peace of mind to know your friends and family are not going to run into any extra expenses.

This is why you should sit down and plan everything with the Funeral Director who works for the plan. Make sure you understand exactly what you are going to get for your money.

There is now such a plethora of UK funeral plans that it is hard to decide which one is right for you. Before you sign on the dotted line, it is best to take a look at as many as possible. The same goes for life insurances. Do make sure they don’t come with any clauses which are going to leave those you leave behind with a big bill for added expenses.

That all depends on what is covered, and this is what you need to make clear before you go ahead. Don’t at any time presume that everything you think is important is covered. Go through the points one by one to make sure what you consider as vital is included in the plan.

On most occasions, you will find the following are part of your funeral plan:

  • Transport and care of the body
  • Funeral car or horse-drawn hearse as agreed
  • Funeral personnel
  • Visiting the body in the chapel
  • You may also find doctor’s fees, cars for mourners and crematorium fees are included. More often than not fees covering costs of a headstone, embalming, burial plot and flowers are not included.

If the owner of the plan was to die abroad, arrangements to transfer the body back to the UK are not covered. A funeral plan may sound great, but you need to make sure you understand what you are paying for before you sign the contract with the company.

Qualifying Periods

Some life insurance companies will stipulate qualifying periods. For instance, they may pay out the full amount straight away for accidental death, but clauses that prevent a payout may exist if you die from an illness less than two years after you took out the life insurance.

Now that we live longer, there are some life insurances that don’t pay out after a certain age. Once again, make sure you check the paperwork and any documentation.

Saving for your funeral

An alternative is to save for your funeral. The downside with this is that funeral costs are going up all of the time, and you may struggle to put enough money away. Even when you pay £20 per month, it will take you a long time to reach an amount that could potentially pay for your funeral and other associated costs.

Another option is to deposit an amount with a solicitor. But what happens if you live to you are 105? Hopefully, someone would have taken over the practice, but you need to ask yourself if there will be enough money in the pot to pay for your funeral.

Managing a funeral plan

Funeral plans are often managed by private companies or trusts. This means there is a risk you could lose any money invested. Some new players in the UK funeral plan market are less scrupulous than others, and you need to know how they are going to protect your investment.

UK regulation has not as yet quite caught up with the funeral plan business. It is best to do a lot of your own fact-checking.

For instance, you need to know the money is going to be there in 20 or perhaps even 30 years, and maybe even longer. Ask how your money will be invested and make sure you can check up on the facts. If you don’t like anything about the funeral plan, it is best to avoid that particular scheme.

Planning for the future

There are many players in both the life insurance market and the funeral planning business, it is hard to know which way to turn. The best thing you can do is to take your time and not rush into any arrangements you are not sure about when it comes to planning for your funeral.

Many families and even couples do not talk about funeral arrangements. It is one of life’s topics which is difficult to talk about but we should try to do so. We all have our ideas and beliefs, and when it comes to the end of life, they must be respected.

So, if you are considering investing in a funeral plan or life insurance, take as much as you can into consideration.

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Because we play by the book we want to tell you that...

1. We understand equity release isn’t for everyone, and we’ll never say it’s the right option for you, that’s why we pass you onto an Expert.

2. A lifetime mortgage is a loan secured against your property. With a lifetime mortgage there are typically no monthly repayments to make as the loan, plus roll up interest, is repaid when the plan comes to an end. Usually, that’s when you, or the last remaining applicant, either passes away or moves into long-term care.

3. With a lifetime mortgage you’ll still retain full ownership of your home.

4. Equity release will reduce the value of your estate and may affect your entitlement to means tested benefits.

5. Mortgage Advice Bureau Later Life offer lifetime mortgage products from a carefully selected panel of providers.

6. Unless you decide to go ahead, Mortgage Advice Bureau Later Life’s service is completely free of charge as their fixed advice fee of £1,295 would only be payable in completion of a plan.

7. ClearKey is an independent marketing website which only acts as an introducer to companies who offer advice on various financial plans, products and services.

8. Our partners are authorised and regulated by the Financial Conduct Authority.

9. are not authorised to give any advice and we are not liable for any financial advice provided by or obtained through a third party.

10. Life insurance products attract terms and conditions. Price information contained within this website are for illustration purposes only. You will receive a full policy document upon application which will set out the terms, conditions and limitations of cover provided under the plan.

11. Your home may be at risk if you do not keep up repayments. Think carefully about securing debt against your home. When consolidating existing borrowing be aware that extending the term could increase the amount repaid.